Quiz 7 Flashcards
A decision model is a formal method for making a choice, frequently involving both quantitative and qualitative analyses
T
Sunk costs are past costs that are unavoidable.
T
Revenues that remain the same for two alternatives being examined are relevant revenues.
F
If the $17,000 spent to purchase inventory could be invested and earn interest of $1,000, then the opportunity cost of holding inventory is $17,000.
F
Opportunity costs never appear in a company’s accounting records since they are foregone costs and not actual costs.
T
If a manufacturer chooses to continue purchasing direct materials from a supplier because of the ongoing relationship that has developed over the years, the decision is based on qualitative factors
T
An incremental product cost is generally a fixed cost.
F
An incremental product cost is generally a variable cost.
In a make-or-buy decision when there are alternative uses for capacity, the opportunity cost of idle capacity is relevant.
T
Qualitative factors are outcomes that are measured in numerical terms, such as the costs of direct labor.
F
For short-run product-mix decisions, maximizing contribution margin will also result in maximizing operating income.
T
For decision making, a listing of the relevant costs:
a. will help the decision maker concentrate on the pertinent data
b. will include future costs
c. will include costs that differ among alternatives
d. All of these answers are correct.
D
In evaluating different alternatives, it is useful to concentrate on:
a. variable costs
b. fixed costs
c. total costs
d. relevant costs
D
When making decisions:
a. quantitative factors are the most important
b. qualitative factors are the most important
c. appropriate weight must be given to both quantitative and qualitative factors
d. both quantitative and qualitative factors are unimportant
C
One-time-only special orders should only be accepted if:
a. differential revenues exceed variable costs
b. incremental revenues exceed incremental costs
c. incremental revenues exceed fixed costs
d. total revenues exceed total costs
B
Discontinuing unprofitable products will increase profitability:
a. if the resources no longer required can be eliminated
b. if capacity constraints are adjusted
c. automatically
d. when a large portion of the fixed costs are unavoidable
A
